Care home buying or selling

Buying or selling a care home is unlike any other business transaction. The business, the property, and the regulated service are bound together, and a change of ownership affects residents, families, staff, lenders, the local authority, and the Care Quality Commission (CQC). This page explains how the legal process works in England, whether you are buying your first care home, growing an existing group or selling a business you have spent years building.

Buying a care home: the legal process

Most care home purchases follow the same broad path:

Heads of terms: the outline of the deal, covering price, whether the purchase is a share sale or an asset sale, what is included, the timetable, and any exclusivity period.
Due diligence: legal, financial, regulatory and property investigations into the business you are buying.
CQC registration planning: on an asset purchase , preparing and submitting the registration applications in good time,.
Contract negotiation: the sale and purchase agreement, including warranties, indemnities and the seller’s disclosures against them.
Funding and security: satisfying your lender’s conditions and completing security documents.
Exchange and completion: coordinated with the CQC so that the change of provider and the sale are completed together.

The order and emphasis vary with the chosen structure, which is why the decision on whether to sell shares or assets comes first.

Share sale or asset sale?

In a share sale, the buyer purchases the shares of the company that owns and operates the care home. The business continues as before under a new owner. Its contracts, staff, liabilities and, importantly, its CQC registration stay in place, because the registered provider, meaning the legal entity, has not changed. Certain changes, such as new directors, must still be notified to the CQC.

In an asset sale, the buyer purchases the business and its assets, such as the property, equipment and goodwill, from the selling company or individual. The buyer assumes only what is agreed in the contract, which can reduce exposure to past liabilities, but the buyer becomes a new provider in the eyes of the CQC and must be registered before taking over the service.

Neither structure is automatically better. A share sale offers continuity, but the buyer inherits the company’s history, so due diligence and warranty protection matter all the more. An asset purchase may be more attractive to a buyer, but brings registration and staff transfer requirements. The tax treatment of the two structures also differs significantly, so we recommend taking accountancy advice alongside legal advice before the structure is fixed.

Due diligence when buying a care home

Due diligence on a care home goes further than in a standard business purchase. Alongside the usual financial and legal enquiries, buyers should examine:

CQC history: current ratings, inspection reports, any enforcement action and the conditions attached to the registration, including the number of people the home is registered to accommodate.
Occupancy and fees: occupancy levels over time, fee rates, the mix of privately funded and local authority or NHS funded residents, and the terms of any funding contracts.
Resident agreements: the terms on which residents occupy the home, fee review provisions and any deposits held.
Staffing: employment contracts, qualifications and training records, reliance on agency staff, pension arrangements and any current or threatened disputes.
The property: title, condition, planning position and compliance, covered in detail on our Care Home Commercial Property page.
Insurance and claims history.

What due diligence uncovers feeds directly into the price negotiation and into the warranties and indemnities you should seek in the sale agreement.

CQC registration and changes of ownership

You cannot lawfully carry on a regulated activity in England, such as providing accommodation with personal or nursing care, without being registered with the CQC. Registration attaches to the provider, the legal entity that carries on the activity, and it cannot be transferred from one legal entity to another. What this means in practice depends on how the deal is structured:

On a share sale, the registered provider is the company, and the company does not change, so the existing registration continues. Relevant changes, for example, to the company’s directors, must be notified to the CQC.
For an asset sale, the buyer must apply to register as a new provider or to add the home to an existing registration, and the seller must apply to cancel its registration or to remove the home from it. The CQC asks both parties to apply at around the same time so it can link the applications and assess them together. It completes the registration upon receiving formal confirmation from both parties’ legal representatives that the sale has been completed.

Registration applications need supporting documents, including a financial viability statement signed by a qualified accountancy firm or a firm regulated by the Financial Conduct Authority, together with evidence of governance arrangements and insurance. Registered managers already at the home can apply to continue their registration under the incoming provider, which helps continuity for residents and staff.

The CQC’s guidance is clear that registration can take a few months. Registration planning should therefore start when heads of terms are agreed, not when contracts are ready to sign. We time the legal transaction around the registration process so that completion and the change of provider line up.

Selling your care home

For many owners, selling a care home is as much a retirement or succession decision as a commercial one. Preparation makes a measurable difference to the price achieved and the speed of the deal:

Get your records in order early: CQC correspondence and reports, staff files, resident agreements, accounts and property documents will all be requested during due diligence.
Deal with known issues before the home is marketed, rather than leaving buyers to discover them and use them to renegotiate.
Protect confidentiality: buyers should sign a confidentiality agreement before receiving information, and you should control when and how staff, residents and families are told about the sale.
Expect warranties and indemnities: buyers will ask you to stand behind statements about the business. We negotiate their scope and manage the disclosure exercise that protects you against claims.

Until the change of provider takes effect, you remain the registered provider, responsible for the service, so the handover plan matters as much as the sale contract. If you are selling your entire business and will stop providing regulated activities, you must apply to cancel your CQC registration as part of the process.

TUPE and your staff

The Transfer of Undertakings (Protection of Employment) Regulations 2006, known as TUPE, protect employees when a business changes hands. In an asset sale of a care home, the staff normally transfer to the buyer automatically on the buyer’s existing terms. On a share sale, the employing company does not change, so TUPE is not normally engaged.

Where TUPE applies, both the seller and the buyer must inform and, in some cases, consult the concerned employees or their representatives. For transfers taking place on or after 1 July 2024, employers may inform and consult employees directly, rather than through elected representatives, where there are no existing representatives in place and either the employer has fewer than 50 employees or fewer than 10 employees are transferring. The seller must also provide the buyer with employee liability information at least 28 days before the transfer.

Getting this wrong is expensive: an employment tribunal can award up to 13 weeks’ gross pay for each affected employee, and seller and buyer can be jointly liable. We build the TUPE steps into the transaction timetable so they are dealt with properly and on time.

Funding your purchase

Most care home purchases involve borrowing, and lenders in this sector have their own requirements, from valuations of the home as a trading business to conditions linked to CQC registration. Shelley Bonney works closely with lenders and advises buyers on funding arrangements and security documents, including legal charges over the property. The property aspects of lending are covered on our Care Home Commercial Property page.

Frequently asked questions

What due diligence is needed when buying a care home?

Alongside standard financial and legal enquiries, care home due diligence covers the CQC’s ratings, reports, and registration conditions; occupancy and fee arrangements; funding contracts with local government or the NHS; resident agreements; staffing; insurance; and the property itself.

Do I need CQC registration before buying a care home?

If you are buying the business and assets, yes. You cannot lawfully run a care home in England without CQC registration, so your registration must be in place when you take over the service. The CQC links the buyer’s and seller’s applications and completes them upon sale. If you are buying the company’s shares, the company’s existing registration continues.

What is the difference between a share sale and an asset sale?

In a share sale, you buy the company that owns the care home, and everything it has, including its CQC registration, staff, and liabilities, stays with it. In an asset sale, you buy the business and its assets from the owner, take on only what the contract transfers, and must register with the CQC as a new provider.

How long does it take to sell a care home?

There is no fixed timescale, but several months from the agreed offer to completion is common. For an asset sale, the CQC registration process is often the pacing item, so it should be started early.

Does TUPE apply when a care home is sold?

On a sale of the business and assets, yes: staff normally transfer to the buyer automatically on their existing terms, and both parties have duties to inform and, where changes are proposed, consult them. On a share sale, the employer does not change, so TUPE is not normally engaged.

Can I sell a care home with residents living in it?

Yes. Care homes are typically sold as going concerns with residents in place, and the transaction is set up to ensure care continues without interruption. Residents’ agreements and funding arrangements form part of the buyer’s due diligence, and the timing of communication with residents and families is planned as part of the sale.

Talk to us

To discuss buying or selling a care home in in Gloucester, Cheltenham, Stroud, the Forest of Dean or anywhere in Gloucestershire? call us on 01452 522 047, email info@tayntons.co.uk, or request a callback. We are proud to have our legal services rated as ‘Excellent’ on ReviewSolicitors.